CIBC is purchasing a 41% stake in American Century Investments, a move that the Canadian bank expects will be the first in a number of acquisitions it could make to expand its wealth management business internationally.
This morning, the firm announced that it was buying the minority stake in American Century from JPMorgan Chase & CO. for $848 million. In addition to the 41% stake, CIBC will also gain a 10% voting interest in the company, the firm said. The deal is expected to close within 90 days pending regulatory approval.
The deal gives CIBC a foothold in the U.S. wealth management market, and it plans to sell American Century products in Canada, along with its own offerings within the U.S., to both retail and institutional clients, said CIBC President and chief executive Gerry McCaughey, in an analyst call this morning about the deal.
“This is a business we know well and we are entering the U.S. in a low risk-exposure way,” he said. CIBC hopes to leverage American Century's presence abroad to further grow internationally, Mr. McCaughey said.
“We are very interested in supporting American Century's international expansion,” Mr. McCaughey said. Over the past three years, the Kansas City, Mo.-based asset manager has set up offices in Hong Kong and London, and the firm currently has $6 billion in assets under management abroad.
“While there are possibilities for further investment by us internationally, we are satisfied with the U.S. position,” he said.
Specifically, both firms are interested in expanding in Asia, said Jonathan Thomas, chief executive of American Century in an interview with
InvestmentNews after the call.
For American Century, parting ways with JPMorgan and gaining CIBC may help the firm gain distribution among U.S financial advisers, Mr. Thomas said. “CIBC doesn't compete with any of the people distributing our product and will ultimately be able to input some of their capabilities to U.S. advisers,” he said.
In June, American Century announced that it had hired former
Fidelity Investments distribution chief Peter Cieszko to fill a new role as head of intermediary and institutional, marking a greater push into adviser sales in the U.S. market. “I think this will help boost our business,” he said in the interview. The firm, which has $112 billion in assets under management, expects 5% organic growth this year, 50-60% through the adviser channel, Mr. Thomas said.
While JPMorgan's acquisition of American Century made sense when it occurred in 1998, over the years their business models have changed, Mr. Thomas said on the conference call this morning.
“At the time, we were a retail manager and they were an institutional manager,” he said. “But over time JPMorgan has built up a strong intermediary and retail capability and we have built up our institutional business so our interests have somewhat diverged.”
“This is an investment made by J.P. Morgan Chase & Co. in 1998, and American Century has exercised its contractual rights to repurchase the non-controlling financial interest and has done so through a third-party, Canadian Imperial Bank of Commerce,” said Kristen Chambers, a spokeswoman at J.P. Morgan.
